What is Economy and How it Applies to our Life?

Economy
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Economy
What does the term “economy” mean to you? How does it apply to your life? Through spending, saving, earning?
An economy is the set of all decisions of individuals, firms, and governments, resulting in interrelated activities of production, distribution, and consumption of goods and services and resources distribution in a country or region. There are different economic systems, those focusing on central planning, mixed economies, and free-market economies. With globalization, there has been increased trade openness and liberalization. In Leonard Read’s 1958 essay “I, Pencil,” he used a parable to argue the case for free‐market economics and capitalism. Money earned as wages or income is spent on consumption or can be saved and invested, and when consumers and governments spend more, businesses get more income. Economic analyses apply to personal savings, personal expenditures, business investments, and earnings.
A decline in our economy put households in a difficult situation, as reflected in the fall incomes and rising unemployment. In this context, savings are a helpful buffer against financial stress. Still, it is challenging to save and manage my finances when there is no steady source of income. Luxury can affect individual improvement since living a simpler life means reduced resource consumption, and luxuries require spending more (Thoreau, 1854). Financial planning is necessary to improve savings, but the opportunity to save depends on the income and lowering my expenditure. When unemployment is low, it is good to save for the future.
The minimalist lifestyle is associated with a lower cost of living based on choices. Even low wages may be enough, and increasing then requires being more mindful of the spending. Thoreau (1854) focused on his experience living alone in the woods, building his house, and meeting the basic human necessities: food, shelter, warmth, clothing, and fuel. To Thoreau, comparing the costs of satisfying the basic needs and hourly wages from labor would help determine the benefits and costs of his lifestyle choices. Based on Thoreau’s ideas, limiting luxurious excesses is necessary for financial planning to limit spending and increase savings.
Savings are equal to disposable income minus private consumption and taxes, so increasing the income and reducing expenses are necessary to increase the savings. Resources are limited, but human needs are unlimited, and as a student, I earn little to meet my needs, and only a small percentage is saved. Another issue in saving is focusing on the goal of saving, and there are various goals such as purchasing a car, a vacation trip, or saving for retirement. The saved resources may also be used for an emergency. The challenge is to prioritize savings to address competing needs and resources. Households, firms, and governments organize scarce resources to satisfy different needs and improve well-being, and for households, savings help build wealth as savings can be invested.
The risk of unemployment and variability in earnings affects how people save and spend their resources. If I work with a regular stream of income, I would like to sav...